Rate designs: What's best for you?

You are here

Public power utilities aim to set rates that are fair to all customers. However, each type of rate design option can affect customers differently. Here’s a quick look at some of the pros and cons of different rate designs.

Rate Design Option

Pros

Cons

Standard/Traditional

Easy for customers to understand

Requires minimal customer education to explain

Might result in cross-customer subsidies for customers with solar, storage, or other distributed energy resources

Net metering/Billing

Simple structure that is easy to bill for/explain

Doesn’t require special metering

Incentivizes distributed generation

Because solar generation is credited at full retail rate, customers without solar effectively subsidize customers with solar

Value of solar

Credit for solar generation reflects actual value of the generation to the system

Customers who cannot adjust energy use are not able to take advantage of savings

Not feasible without smart meters

Could pose cost recovery issues if customers reduce peak demand more than anticipated

For more information about these rate design options and how they affect customers and utilities managing distributed energy resources, see Distributed Energy Resources and Public Power, a new report from the American Public Power Association.